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Losing data in the cloud

Do not assume that data lost due to an online service failure will be recovered. A backup plan is rarely included in the subscription fee. And the alternative – compensation – may not add up to much.

When talking about the pros and cons of cloud computing with clients, I am surprised how many have not paid much attention to disaster recovery planning. Specifically, what happens if the online service loses some of your data and can’t get it back?

The assumption is that the online service provider will do everything humanely possible to get the data back because the alternative will be having to pay compensation to their customers. And that compensation could add up to a lot of money. That may be true with regards to the total payout but it may prove to be of scant consolation to the individual customers affected.

How much compensation are we really talking about?

To find out, you need to read the Limitation of Liability in your terms of service. Here’s the customer agreement (at the time of writing) if you use Amazon Web Services:

11. Limitations of Liability.

… LIABILITY UNDER THIS AGREEMENT WILL BE LIMITED TO THE AMOUNT YOU ACTUALLY PAY US UNDER THIS AGREEMENT FOR THE SERVICE THAT GAVE RISE TO THE CLAIM DURING THE 12 MONTHS PRECEDING THE CLAIM.

And that’s the norm. Microsoft, Oracle, IBM, Salesforce etc. All will have similarly worded terms of service because ‘Limitation of Liability’ has 300 or so years of case law behind it. The total amount of subscription fees you pay in one year is the most you are likely to receive in compensation for any cost incurred to your business due to indirect losses. If you’re on a free service, good luck with that! But even the paid services are seeing ever-declining subscription fees. The 12-month cost of the service is likely to be insignificant compared to the value in your data.

The importance of disaster recovery and business continuity planning is just the same for online services as for on-premise computer systems. The difference is that online services are so much easier to set-up – a credit card is pretty much all that is required – they are already in active use before anyone pauses to consider what protection is needed.

In 2003, a report was published that looked into how costly data loss could be to a business. The findings included:

One study reports that a company that experiences a computer outage lasting for more than 10 days will never fully recover financially and that 50 percent of companies suffering such a predicament will be out of business within 5 years

It would take a significant event to knock out an online service for 10 days. Indeed, far more effort than to disrupt an on-premise server. But it is not impossible and the likelihood increases as cloud computing grows. The type of backup needed varies significantly between services. A simple file sync-n-share storage plan is of far less concern than those online services that do not offer easy local synchronisation of all content in real-time. But do not assume that any amount of compensation will be enough to save your business if the service fails. Make sure you have a back-up plan!